An Evaluation of Medicare

Vol. XIII

No. 6

November-December

1995

The Challenge of Health Care Financing Reforms*

by Orville Solon, Lea Sumulong, Carlos Antonio Tan, Jr., Joseph Capuno, Pilipinas Quising and Stella Alabastro

HEALTH CARE STRUCTURE AND FINANCING: AN OVERVIEW

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n 1991, the government spent approximately P29 billion for the health sector, an amount that was barely 3 percent of the country’s gross national product (GNP). A Department of Health-Philippine Institute for Development Studies (DOH-PIDS) survey estimates that roughly 24 percent of the population (14 million Filipinos) utilized some form of medical care in 1991.

Dividing the P29 billion spent on health care by the number of health care users that year, it is estimated that each consumer received an average of P2,000 worth of medical services. In the same year, the average cost of hospitalization was three times this amount. This could only mean that some consumers did not receive the appropriate health care services needed. In this sense, it can be said that because of lack of financing, much of the health care needs are unmet.

At present, health care services are financed through various modes. These include the following: z Direct payments by individual families . Health care consumers finance up to 38 percent of total national health care expenditures through direct out-ofpocket payments. Individual families dip into their savings, borrow, or sell property to raise the amount needed to cover medical expenses. This method of financing dominates private health care markets.

F Page 12 *This is a condensation of chapters 1 to 5 of the integrative report of the DOH-PIDS project Baseline Studies on Health Care Financing Reforms. The project was designed to provide baseline information that would improve our understanding of the Philippine health care financing system. The studies undertaken focused on secular influences on the health care system, the behavior of health care consumers, the profile and behavior of health care providers including various types of medical manpower (doctors, nurses, midwives), and the operations and performance of health care financing institutions. The bulk of the research materials came from primary data on households, hospitals (and patients), clinics (and patients), and insurance firms (and members) collected from seven provinces in four regions in the Philippines.

Secondary data from relevant government institutions complemented the survey data.

ISSN 0115-9097

Editor's Notes In this special issue, we highlight the findings of the integrative report of the Department of Health-Philippine Institute for Development Studies project on Baseline Studies on Health Care Financing Reforms..

The integration of the 24 individual research studies under the project was truly a herculean task, and for this effort, we should thank Dr. Orville Solon and his associates.

To cover everything in the integrative report in so short a space would do injustice to it and that is the reason why our main article focuses only on an overview of the health financing system, demographic factors which impinge on health care financing, and a profile of both health consumers and health providers. We strongly suggest that the reader go through the entire integrative report for a more indepth analysis of the issues involved.

Chapter 8 of the integrative report ( an evaluation of Medicare and prospects for improving the system) is featured starting on p. 2 while Chapter 9 (on private health insurance as alternative financing mechanisms) can be found on pages 6-7 of this DRN issue.

Meanwhile, as a tribute to the successfully concluded APEC economic leaders' meeting in Osaka, Japan, also included in this issue is the economic leaders’ declaration of action during that meeting, which you will find on p. 10.

What's Inside 2 6

An Evaluation of Medicare Private Health Insurance as Alternative Financing Source

10 APEC

Economic Leaders’ Declaration of Action

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n 1969, Republic Act 6111 was signed into law creating the Philippine Medical Care Commission (PMCC) as the overall policymaking and coordinating body to oversee the Medicare program.

In performing oversight functions over Medicare, the PMCC takes care of programming and structuring medical benefits. In contrast to direct provision of health care services, the PMCC provides medical services to its beneficiaries indirectly, either through direct payment to accredited providers or through reimbursement to the patient of actual health expenses incurred. As such, the monitoring and evaluation of the quality of services by providers logically becomes a major PMCC responsibility.

In the management of the program’s funds— known as the Health Insurance Fund (HIF)— the Government Service Insurance System (GSIS) and the Social Security System (SSS) act as financial intermediaries tasked to collect premiums, disburse benefit payments, and invest reserves or unused premium contributions. These activities are undertaken by the GSIS and SSS independently of each other.

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Lackadaisical coverage Between 1980 and 1991, the annual average growth rate of Medicare coverage was over 2 percent, roughly equal to the country’s annual population growth rate between intercensal years 1980 and 1990. This implies that the Medicare coverage base (consisting of premium payers, their dependents, retirees, and voluntary self-employed members) has been merely keeping pace with the population expansion, on average.

Over half of the population continue to be without coverage. This is because Medicare concentrated largely on the industrial and service sectors (through SSS) and the public sector (through GSIS). As a result, coverage among the self-employed,

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grew only by 2 percent. In other words, Medicare enrollees represented a little more than 25 percent of the employed population in 1980, then fell to about 20 percent in 1990. However, as a percentage of the salaried employee, Medicare enrollees averaged 48 percent during 1981-1990.

Unequal access to medical services Although Medicare members receive uniform financial support, they still face unequal access to medical care due to other constraints imposed by the market, such as the uneven distribution of hospital facilities and medical specialists across regions.

In terms of number of accredited hospitals and clinics across regions in the country, Central Luzon (Region 3),

An Evaluation of Medicare*

Program performance To measure Medicare performance against its objectives, several aspects of its administration and operations need to be reviewed. The DOH-PIDS project thus includes as one of its studies an evaluation of the Medicare administration and operations. The succeeding sections constitute the major findings of such evaluation which cover the period 198191 of the Medicare history.

*This is a condensation of Chapter 8 of the Integrative Report of the DOH-PIDS project Baseline Research on Health Care Financing Reforms.

those in the informal sector and in the farms is very low. In fact, a large proportion of the working poor, farmers, fisherfolk, and rural workers, are without coverage because the geographic dispersal of farms and fishing villages makes Medicare insurance difficult to provide.

Moreover, SSS has attracted few selfemployed to Medicare because it offers social security insurance as a take-itor-leave-it package, which includes Medicare, retirement, disability, and education components. In 1991, social security coverage was extended to selfemployed farmers and fisherfolk earning at least P18,000 annually, based on SSS findings that rural cooperatives could serve as locus of collection and payment.

During 1980-90, the labor force grew close to 4 percent annually and the employed population grew by over 3 percent, but Medicare membership

Southern Tagalog (Region 4), and Southern Mindanao (Region 11) have the most number (164 to 173) compared to Metro Manila’s 142. Metro Manila has the largest bed count mostly found in tertiary hospitals.

Meanwhile, many secondary facilities are found in Regions 3 and 4, which are relatively economically welloff, while small primary facilities abound in the more depressed areas like Regions 5, 10, and 11.

No lack of effort in expanding base The presence of a fairly large number of nontertiary facilities in outlying regions suggest that efforts to widen the catchment area for Medicare services have not been wanting, as a result of which Medicare eligibles have access to at least primary types of medical care.

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Metro Manila leads pack Metro Manila leads other regions in the number of beds per thousand Medicare population (Medicare population per region was estimated by multiplying the total Medicare coverage by the percent of employed found in that region) with almost 9 beds per thousand. Central Visayas and Western Mindanao, which have low bed capacities, also have low bed to population ratios.

Cordillera, however, has a high bed count per thousand despite having a low bed capacity because it has the lowest estimated Medicare population.

The pattern of regional allocation of physicians (including dentists) accredited by Medicare looks very much like the regional distribution of health facilities since accredited doctors work within accredited hospitals and clinics.

However, only NCR, CAR, and Region 5 have at least 1 doctor per 1000 Medicare population.

This indicates that while the introduction of Medicare caused the outlying regions to make rapid gains in the provision of medical services, they have yet to experience any substantial gain in per capita availability of facilities and medical manpower relative to Metro Manila residents.

Services not uniform across regions However, only a few regions have the full range of Medicare services since few medical specialists are available to take on the more difficult and complicated Medicare cases.

General practitioners dominate the system, far exceeding the recommended ratio of 0.05 per 1000 population in all regions. On a national level, only obstetrician-gynecologists and pediatricians are in oversupply while the rest are underrepresented.

This indicates that the lack of advanced facilities in poorer regions constitute a significant deterrent to the availability of medical specialists. Moreover, no incentives exist to encourage concentration of specialized medical

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“Over half of the population continue to be without health coverage.

This is because Medicare concentrated largely on the industrial and service sectors (through SSS) and the public sector (through GSIS).�

resources in poverty stricken communities.

Fortunately, the resulting Medicare use patterns do not necessarily correspond to health care access levels. Although accredited health facilities and medical practitioners tend to congregate in Metro Manila and other urban places, Medicare use, at least within the public sector, is not monopolized in the NCR. Specifically, a higher number of users is found in Regions 4, 10, 11, and 12.

Furthermore, the following patterns of Medicare usage emerged: dependents are more likely to use Medicare than members; female beneficiaries outnumber males by roughly two to one; except for Metro Manila, all regions have a larger number of rural beneficiaries.

Claims processing for government workers In the GSIS Medicare processing system, there is a clear-cut separation of responsibilities and control among various entities.

There may be understaffing, however, because of the growing stockpile of half-processed claims. In particular, it takes ten days to complete the processing of each of the daily surge of 2,000 incoming claims, resulting in a backlog of close to 51,000 claims per month. There is further evidence that few claims are

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being disapproved by the GSIS. Except in 1974, 1978 and 1979, the proportion of rejected claims has not gone beyond 10 percent between 1972 and 1988.

Beginning 1980, there has been a declining trend in disapprovals, averaging only 4 percent between 1982 and 1988.

On the whole, although an obvious routinization has set in, it is unclear whether the lack of rigor actually encourages fraud. What is clear is that there are no standards to go by since there is no complete manual of operations.

Claims processing for the private sector Unlike GSIS where all processing takes place in its central headquarters in Manila, SSS has completely devolved claims processing to its ten regional offices.

The processing system, although new, is very detailed and is well-equipped with controls that can detect most incomplete, irregular and fraudulent claims.

Under the new processing system, backlogs are few and a new standard of 10 days processing time has been set. This is very plausible since only 600-700 claims come in daily.

However, it is a widely-held perception that the rate of claims rejection in SSS processing is too high.

If this is so, then processing efficiency is being falsely traded off with a fewer number of beneficiaries. On the other hand, a spin-off benefit of an efficient processing scheme is the early detection of claims which are irregular, incomplete or fraudulent.

Unit cost of processing claims Given their respective claims processing features, it is estimated that the cost of processing a single GSIS claim was about P17 in 1991 or about P89 cheaper than a single SSS claim for the same year.

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Steady increase in health insurance fund The health insurance fund (HIF) has risen steadily, from P491 million in 1980 to P3 billion in 1991, representing an average yearly increase of 18.4 percent. SSS accounts for two-thirds to three-fourths of the fund, partly because of its larger membership base which brings a correspondingly bigger chunk of collection income.

In terms of composition, Medicare income over the years has shifted progressively in favor of investment income, with the change occurring much more rapidly for SSS. In 1980, barely 10 percent of Medicare’s total income is investment income. By 1990, almost 45 percent of Medicare’s earnings came from investment interest payments alone. The phenomenal growth of investment income suggests an increasing ability by Medicare to cope with inflationary medical care costs by lessening pressures on collection income.

As Medicare’s dependence on premium income weakens, its risk-sharing capability can be expanded.

Healthy fund management At no point between 1980 and 1990 did the Medicare system suffer any underwriting shortfall, defined as the difference between total expenditures (benefit and administrative expenses) and premium payments. SSS never had to draw from investment revenues to defray expenses, while GSIS experienced net underwriting losses in 1985, 1988, and 1991.

Rising income from premiums and investments The system as a whole has been experiencing a rising net income (defined as premium income plus investment income) which has

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expanded almost Table 1 eight times, from Changes in Income due to the Medicare Tax P154 million in (By Quintile) 1980 to over P1 billion in 1991. As usual, the inQuintile Benchmark Income After tax Income % Change (In pesos) (In pesos) crease is largely accounted for by SSS. SSS’ total Poorest quintile 53.3188 53.2304 -0.166 income has conQuintile 2 85.4098 85.2755 -0.157 sistently pulled Quintile 3 119.0240 118.8480 -0.148 away from total Quintile 4 174.2980 174.0670 -0.133 e x p e n s e s , Richest quintile 337.2500 336.8150 -0.129 allowing its net income to grow.

Source: Beringuela (1993).

Since 1984, net income has overGSIS has posted a higher return on taken total expenses and in 1991, SSS’ equity (35 percent annually) compared net income accounted for over 97 to SSS’ 23 percent per year. percent of Medicare’s net revenues. In For the entire Medicare system, contrast, GSIS’ total expenditures have as cumulative reserves shot up fifteenkept pace with its total income across fold from P439 million to close to P7 the years, maintaining constant billion, reserve capacity (defined as pressure on both investment and reserve levels as a percent of total collection incomes. expenses) also went up from 1 year to as high as over 5 years in 1989. On Longterm fund stability average, it will take more than 3 years Medicare’s ability to meet longbefore Medicare funds dry up, given term obligations from its local assets current expenditure levels.

In and earning power, as measured by particular, SSS’ reserve capacity leverage ratios, is much more secure averaged close to 5 years in the last and less prone to destabilizing factors. decade while GSIS averaged only about The predictability of premium income 1 year. and sound investment decisions have largely kept both debt-to-total assets Spending keeps pace with income ratio (total liabilities/total assets) and The growth of Medicare debt-to-equity ratio (total liabilities/ expenditures has kept pace with the reserves) exceedingly low during the growth of collection and investment 1980-91 interval. Of the two systems, SSS has kept total liabilities to a incomes. Generally, benefits expense minimum while constantly stockpiling as a proportion of collection income assets. GSIS, meanwhile, has relatively captured anywhere from 68 to 92 percent during 1980-91 but benefits higher liabilities.

Overall, the system’s return on expense for GSIS grew faster than that investment (ROI) has alternated for SSS by about 2 percentage points. between respectable lows (e.g., 10 In the same light, the claim of GSIS percent) and exceptional highs (e.g., 38 benefit expenditures on collection percent). Medicare’s ability to offset income is relatively larger compared correspondingly high benefits and to SSS. operating expenses by high incomes, Public workers more dependent as measured by return on equity, is on Medicare likewise generally in good shape, Although more people were averaging about 25 percent yearly brought into the Medicare program, during the period 1980-91. On average,

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not many more of those eligible actually received medical care services. The number of beneficiaries hardly changed, at about 6-7 percent of the coverage base in 1980-91. It should be noted, however, that GSIS has given benefits to a higher percentage of eligibles within its own Medicare coverage base, always about twice as that of SSS. Apparently, many public sector workers are dependent on Medicare, presumably because Medicare is the only medical insurance available to them.

In the private sector, many firms offer comparable social security benefits to their workers, resulting in a lower usage of Medicare. Benefits paid per recipient rose from less than P300 in 1980 to almost P1,300 in 1991. SSS paid higher average values per claim but GSIS paid as much as two-thirds higher benefits per capita (since GSIS has a bigger proportion of beneficiaries in its coverage base).

Laxity in accreditation Medicare accreditation is based on the licensing standards of the Department of Health (DOH).

Secondary and tertiary hospitals need only show their DOH license to operate in order to gain PMCC accreditation.

This laxity is meant to facilitate, rather than hinder, accreditation. Appropriate norms on PMCC accreditation procedures, however, such as the number of medical personnel, number of beds, facilities, etc., are not precisely determined. A comprehensive manual of operations on how accreditation is to be done in the context of a more professionalized process is clearly necessary.

Weak monitoring In addition, PMCC’s power to monitor accredited hospitals all over the country has not been fully implemented because of budgetary constraints and lack of orchestration of efforts within the Medicare system. In the first quarter of 1991, PMCC put under surveillance only 15 percent of

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the total number of providers all over the country which is estimated at 1543.

This is because PMCC hardly coordinates with SSS and GSIS, both of which also have surveillance powers over the hospitals.

A coordinated effort to resolve this problem would have addressed some of the capacity constraints being experienced by PMCC and perhaps would have achieved economies of scale in monitoring.

it costs six times as much to process claims in SSS than in GSIS in 1990 and almost three times as much in 1989.

Combining the costs incurred by SSS and GSIS in administering the Medicare program, total operating costs have risen to over P97 million in 1991, compared to only about P26 million in 1981, reflecting an increase of more than 370 percent.

Administrative costs

In terms of monthly income, the poorest group’s contributions comprise more than 50 percent of total GSIS contributions, followed by the middle income group at 35 percent and the richest group at about 12 percent. For SSS, the pattern is reversed. The lowest income group’s contributions comprise no more than five percent of total contributions while the highest income

The costs of implementing Medicare Program I are jointly borne

by SSS, GSIS, and PMCC. The two social security agencies have derived their resources for administrative expenditures from the HIF while PMCC depends fully on the central government for its financial resources.

Who contributes the most

“...it was found that the Medicare payroll tax is regressive since the decrease in income declines as income increases...”

For 1981-91, the operating expenses of the Medicare program under SSS were on the upswing, not because resources have been poured to the detection and reduction of fraud and abuses, but because of fringe benefits given by the SSS management to its employees. This is not to suggest, however, that these benefits are excessive and ought to be discontinued.

The issue is whether on the basis of per peso of benefits, it is becoming costlier to be insured in Medicare under SSS than under GSIS. To restore the balance between benefits and operating costs, SSS could make the necessary adjustments by revising the Medicare benefit structure or simply increasing medical care benefits.

By contrast, Medicare operating costs under GSIS are declining. In fact,

group comprises almost 54 percent of total contributions.

The pattern of distribution of Medicare contributions across age groups is similar for GSIS and SSS, with more than 60 percent being accounted for by members in the 26 to 45 age group. In GSIS, contributions are almost equally accounted for by each gender group while in SSS, contributions from male members predominate those from the females.

Who benefits the most The pattern of distribution is similar for both GSIS and SSS Medicare contributions. For GSIS, however, a large portion (more than 70 percent) of

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benefits were distributed to the lowest income group, 20 percent to the middle income group, and only eight percent to the highest income group. For both GSIS and SSS, the 26-45 age group had the largest claim on Medicare benefits, followed by the 45-65 age group. In terms of the retiree group, however, it is GSIS which was able to distribute a larger share of benefits, at about nine percent, compared to SSS’ one percent.

A regressive payroll tax Medicare contributions are payroll taxes. Like all other taxes, the true incidence of Medicare tax bounces off to other sectors in the economy. In order to quantify the likely impact of Medicare taxes in other sectors, a computable general equilibrium (CGE) model built by Clarete was used. The Clarete model uses the 1989 data set for production, consumption, taxes, and income distribution.

From the CGE experiment, it was found that the Medicare payroll tax is regressive since the decrease in income declines as income increases. This is shown in Table 1 on page 4 by the high percentage reduction in income of household in the first quintile (-0.166 %) compared to only about -0.129 percent for those in the fifth quintile. In addition, the tax is associated with a deadweight loss since it distorts the relative price of labor vis-a-vis other factor prices.

Reforming Medicare z Expanded role of PMCC relative to SSS and GSIS .

PMCC must be endowed with a corporate structure to improve its leverage over all the components of the Medicare system. Potential areas where it can assert authority as mandated by the Medicare Act are research and development and expanded control over the management of the health insurance fund.

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z Reorientation of PMCC’s profile and distribution of personnel .

The PMCC’s administrative personnel outnumber its technical personnel by almost 3 to 1. The ratio is inordinately high, since a ratio of 1 to 1 would already be considered too askew in favor of administrative-oriented skills. z Prioritization of public information activities . Information is a necessary ingredient in reducing the uncertainty in the Medicare system: PMCC can function as a perfect information agent for Medicare enrollees. Well-informed members can deter abuses and collusive behavior and prevent roundabout procedures that lead to misallocation of time and money resources. z Help rural people become organized for Medicare . PMCC could very well serve as a vertical coordinator of rural-based Medicare projects. For instance, it could assess the capability of the community to sustain the growth of a local health insurance fund. z Merging the HIFs . The two HIFs could be merged and managed by a third party, preferably a restructured PMCC. Evidence suggests that the current setup—in which the Medicare fund is divided between two financial intermediaries (GSIS and SSS) and in which the main developmental body (PMCC) is more at ease performing regulatory functions—is inadequate.

Among the potential benefits of a unified fund are: (1) the rescuing of GSIS Medicare funds (2) streamlining of claims processing and avoidance of costly backlogs (3) avoidance of duplication of administrative expenses and (4) orchestration of disparate efforts on monitoring providers and imposing appropriate sanctions. z Design of appropriate public/ private health service mixes . Engaging the services of private health care intermediaries, such as HMOs, can influence efficiency in the delivery of medical services and costs themselves can be contained. DRN

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rivate health insurance includes commercial indemnity health insurance, health maintenance organizations (HMOs), employer-provided benefits and community level insurance.

Commercial indemnity health insurance firms provide health and accident insurance.

These firms generally offer health insurance to complement their life and nonlife insurance packages whose coverage, at present, is limited to the upper income bracket.

Health maintenance organizations act both as medical expense insurers and direct health care providers to insured members. There are three types of HMOs in the Philippines: investor-based, community-based, and employer-initiated HMOs. Investor-based HMOs, which focus on the employed sector and are basically profit-oriented, generate most of its income from corporate accounts.

Community-based HMOs are experimental, nonprofit organizations in lower-income communities.

Employer-initiated HMOs are formed by companies solely for their employees and their dependents. The employer-initiated HMO is similar to the community-based HMO because it is established in a corporate community, is nonprofit, and offers lower membership fees.

The health insurance industry tends to favor urban dwellers, the employed sector, and the economically better-off population, thereby raising questions of equity in service provisions.

Commercial indemnity insurance and HMOs In 1988, there were 102 private commercial indemnity insurance firms.

Between 1975 and 1988, there were more nonlife insurance companies (92% of the total) than life insurance companies. Of the 92 percent share of nonlife companies, domestic nonlife insurance firms accounted for 76

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Private Health Insurance as Alternative Financing Source* percent. On the other hand, domestic life insurance companies captured a mere seven percent of all commercial indemnity insurance firms.

The Philippines has, by various estimates, from 12 to 26 HMOs, most of which were incorporated and started operating only in the 1980s.

On average, premiums charged by commercial indemnity firms for one year of health insurance coverage is about P4,000. There is also a large variance in the premium costs being charged by HMOs to their members, ranging from a low of P600 to a high of P35,000. The average annual premium charged by HMOs, however, is higher than those charged by commercial indemnity insurance firms by about P2,000.

Majority of nonlife insurance firms cover only hospitalization services which are in turn limited to the treatment of injuries due to personal and/or motor vehicle accidents.

A few nonlife insurance firms offer a comprehensive package which includes outpatient consultations, diagnostic services and hospitalization services but which are likewise limited only to those needed for the treatment of injuries caused by personal/motor vehicle accidents.

Other nonlife insurance firms only reimburse the cost of drugs and medicines for the

*This is a condensation of Chapter 9 of the Integrative Report of the DOH-PIDS project Baseline Research on Health Care Financing Reforms.

treatment of injuries due to personal accident.

Nonlife insurance firms generally provide the benefits to their members in the form of cash reimbursement, hence they often do not see the need to accredit service providers. Neither do they impose restrictions as to where or from whom the members could consult or avail of medical services. There were, however, defined ceilings for service cost per accident which usually consists only of an outer limit. The ceilings depend on the units of insurance enrolled in, subject to a maximum amount. For other nonlife insurance firms, the ceilings were proportionate to the principal or total value of the insurance as well as with the provision for a maximum amount. Still other non-life insurance firms have a set lump sum amount per accident regardless of the type of services availed of.

All life insurance firms also provide hospitalization services but with additional benefits consisting of any one or combination of the following: surgical, nursing, and maternity services. Life insurance firms likewise provide benefits in the form of cash reimbursement and do not impose restrictions with regard to service providers.

However, some life insurance firms also provide direct services through their company physicians.

In line with the objective of managed care, HMOs provide comprehensive services covering all

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outpatient consultations, diagnostic services and hospitalization. Though comprehensive in benefit coverage, services can be availed only from accredited and/or company service providers, except when it involves an emergency situation where cash reimbursement is allowed. If a member avails of services from non-accredited service providers for a non-emergency case, claims are subjected to a penalty, either in the form of lower reimbursable amount, or disallowance.

Even in emergency situations, procedural controls are set, which usually entails notification of the HMO coordinator within a specified time.

In nonemergency situations, procedural controls such as the issuance of referral slips or letters of authorization are imposed.

Just like those of life insurance firms, HMO benefit ceilings have both outer and inner limits. Inner limits are usually set on room and board daily costs, professional fees, and number of allowable procedures.

As a policy, commercial indemnity firms and HMOs have a common set of conditions which are excluded from benefit coverage.

Service providers of commercial indemnity insurance firms are usually paid on a cash reimbursement basis upon presentation of a statement of account. For nonlife insurance firms which offer packages like motor vehicle insurance, police reports of the accident are also required. As to work-related accident insurance, a certification from the employer regarding the circumstances of the accident has to be attached as well.

Although some HMO-accredited providers are paid on a fee-for-service basis, most HMO doctors are employed by the organization and paid regular salaries. Salaried doctors, which are mostly general practitioners, usually serve at HMO-owned outpatient clinics and hospitals. Accredited doctors paid on a fee-for-service basis generally provide specialist outpatient con-

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sultations and attend to inpatient cases referred by HMO’s salaried doctors.

These accredited doctors normally run their own outpatient clinics in certain hospitals where they have admitting privileges. Since most HMOs in the country own only outpatient clinics, HMOs usually enter into contracts with hospitals that agree to provide inpatient care to HMO members.

In order to ensure the financial viability of HMOs, there is a need to consider hospital pricing behavior.

Since most HMOs do not own hospitals, members generally seek inpatient care from accredited hospitals. However, the ability of hospitals to adjust their prices anytime threatens the financial performance of HMOs, particularly on their existing contracts with members.

Normally, coverage of inpatient care under commercial indemnity insurance companies and HMOs are complementary to Medicare since it starts only where Medicare coverage ends.

Hospitalized members can avail of HMO and commercial indemnity insurance benefits only after exhausting the allowable Medicare benefits.

Employer-provided schemes In 1985, at least 50 percent of 42 companies that filed CBAs with the Department of Labor and Employment gave some form of health benefits to their employees.

Moreover, results from a 1989 survey of CBAs of 149 companies showed that a majority (32%) included group hospitalization insurance contracts with private companies and 15 percent listed company-administered medical insurance programs among their benefits.

In terms of voluntarily provided health benefits, results from a 1990 survey of 127 companies indicate that 97 percent provided medical/ retainer services and 79 percent used HMOs. In addition, 87 percent of the

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respondent companies had infirmaries or clinics in their premises.

Generally, premiums for employer-provided health benefits come in the form of company appropriations.

Several companies appropriate fixed budgets which were estimated based on benefit ceilings and total number of employees.

Other companies appropriate a fixed annual budget, the amount of which is based on a study of a similarly-designed health benefit package.

Still other companies do not appropriate a specific amount and just draw from the overall administrative funds should claims be made. There are also those which have established a formula for cost-sharing

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for any form of service. In some firms, benefits are in the form of cash loans.

There is no limit to the amount of loan as well as the type of service availed of.

Although the employees do not make any prepaid contribution, the total loan is paid back at no interest, with liberal amortization period depending on the income level of the employee. In other firms, benefits covered consist of a comprehensive package of inpatient and outpatient services, including dental, rehabilitation, and maternity services.

Employer-provided health benefits also complement Medicare.

They are generally offered to expand the inpatient care coverage of, and to include some outpatient benefits to, workers and their dependents.

Due to minimal limits or exclusions from coverage, however, employerprovided health benefits may be subject to abuse and misuse by company employees. Furthermore, since employerprovided health benefits are largely dependent on employers’ generosity and employees’ demand for benefits, the expansion and sustainability of these health benefits may be constrained by management-union conflicts.

The expansion of health benefits is also contingent on the overall profitability of the business.

The health insurance industry tends to favor urban dwellers, the employed sector, and the economically better-off population, thereby raising questions of equity in service provisions. with employees, either in terms of the cost of the premium or the cost of actual services used. Among the firms which have come up with sharing schemes for the cost of providing health benefits to their employees, premium contributions ranged from P240 to P1,500, and averaging at about P600 per year.

Most employer-provided health benefits are operated like HMOs where services are provided by accredited company service providers.

Some companies even reinsure their employees in HMOs. Employers are, however, generally more lenient and tolerant about the use of non-accredited service providers.

Furthermore, ceilings, which are negotiated between the union and the management, are usually only of outer limit, allowing the employee to make use of the benefit

Community-based schemes Although there has been no complete count of community-based schemes in the country, evidence from a sample of these schemes suggests that most had been in operation for only about ten years, with the longest in operation starting in 1971. Generally, beneficiaries of community-based health schemes were confined to members of the community organi-

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zation but the benefits were extended to all relatives of the scheme’s members.

Contributions made for community-based health plans are often based on the member’s perceived affordability level which, in most cases, is agreed upon during community consultation. Some community organizations are able to establish the affordability level after a survey of household income and expenditures.

Other organizations conveniently schedule the collection of members’ contributions after harvest time. There are also those which link their respective health plans to incomegenerating projects (IGP). Depending on the type of health benefits being offered by various community-based schemes, premium contributions vary from a low of P8 to a high of P1,200 per year.

On average, however, annual premium contributions charged by community-based schemes settle at about P200. Unspent contributions are usually deposited in the bank to earn interest. There are also communitybased organizations which have several other sources of revenue such as interest income on loans, bank deposits, rental, and other investments.

Benefits of community-based insurance schemes are even more varied.

For some community-based organizations, benefits come in the form of discounts on the price of drugs.

Other schemes require each member of the cooperative to pay annual contributions ranging from P100 to P250, for which he may be reimbursed of any health expense up to P1000 per year. In other communities, 10 to 50 percent of the IGP interest earnings are set aside as contribution to a health fund from which members can avail of cash loans up to P200 to P1000 per illness. Some other community-based organizations even offer dental assistance to members.

Since benefits are usually in the form of cash reimburse-

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ment for health expenses incurred, there is no need to accredit health care providers.

However, members are encouraged to seek services from government facilities since they charge lower prices than private facilities.

With lower premium contributions, community-based health plans generally offer lower-cost benefits. As supplementary measures, however, these organizations usually promote the use of alternative health procedures and traditional medicines and maximize the use of health paraprofessionals such as midwives and trained barangay health workers as primary care provider.

Principal members of community-based schemes generally share the characteristics of those with employer-provided health benefits, except that a larger majority are females and only elementary graduates.

Similarly, majority of the characteristics of households covered by employerprovided health benefits are shared by those under community-based schemes. The only difference is that households covered under communitybased schemes consist predominantly of males and belong to the lower income groups.

Among the various types and categories of private health insurance, only the health plans under community-based schemes are offered as substitutes for Medicare insurance.

This is because Medicare has failed to fully implement Program II which aims to reach the communities most in need of assistance in times of health emergencies.

The development of communitybased health care financing, however, requires intensive communityorganizing inputs. Among others, the

Community-based organizations perceive the lack of health facilities as their most serious problem to date.

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organizing process would set in place very flexible organizational and management operating systems that are responsive to local conditions. In other words, there can be no single formula for the organization of community-based health care financing that may facilitate expansion of coverage to other areas. As in other area-based initiatives, communitybased health care financing have limited potentials for achieving economies of scale.

Community-based organizations perceive the lack of health facilities as their most serious problem to date.

Still other organizations face problems owing to conflicting program orientations wherein some nongovernmental organizations gave free health services thereby making it difficult to encourage members to remit premium contributions.

Nonetheless, support from the government will be well-appreciated, particularly in terms of: z the establishment of hospitalbased drug cooperatives where lowincome groups can avail of low-cost medicines unavailable in communitybased drug cooperatives; z technical assistance or training on health; z grants; z increased assistance for income-generating projects to sustain the health plans; and z continuing support for preventive health measures.

Policy agenda for government z The infrastructure for telecommunications needs to be enhanced to minimize delays in the processing of documents and facilitate field-level decisionmaking of commercial indemnity firms and HMOs. Improved communication facilities would also enhance data retrieval and management to serve as basis for planning or policy formulation.

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APEC Economic Leaders’

Declaration for Action*

1

We have gathered in Osaka to further advance the Asia-Pacific economic dynamism and sense of community. The Asia-Pacific is experiencing the most striking economic growth in the world and everincreasing interdependence. It is a major contributor to global prosperity and stability.

We believe our economic reforms based on market-oriented mechanisms have unleashed our people’s creativity and energy and enhanced the prosperity and living standards of our citizens in the region and the world as a whole. In the current climate in our vast and diverse Asia-Pacific region, APEC presents us with a golden opportunity for the 21st century. Through APEC, we can harness, coordinate and channel dynamic economic trends to our collective advantage.

2

At Blake Island, we established the vision of a community of AsiaPacific economies, and at Bogor, we set a number of specific goals and objectives, including: z free and open trade and investment in ithe Asia-Pacific no later than 2010 in the case of industrialized economies and 2020 in the case of developing economies, z expansion and acceleration of trade and investment facilitation programs, and z intensified development cooperation to attain sustainable growth, equitable development and national stability.

We have, with Osaka, entered the action phase in translating this vision and these goals into reality. Today, we adopt the Osaka Action Agenda, the embodiment of

* This Declaration highlights the Asia-Pacific Economic Cooperation Economic Leaders' Meeting held last November 19, 1995 in Osaka, Japan. It is an important document in that it sets up the direction APEC is supposed to take in the coming years. The next APEC economic leaders' meeting is scheduled in November 1996 at Subic, Philippines.

our political will, to carry through our commitment at Bogor. We will implement the Action Agenda with unwavering resolve.

3

The Osaka Action Agenda is the template for future APEC work toward our common goals. It represents the three pillars of trade and investment liberalization, their facilitation, and economic and technical cooperation. Achieving sustained economic development throughout the APEC region depends in pursuing actions in each of these areas vigorously.

Reflecting the diverse character of APEC and the broad scope of our activities, we will achieve the longterm goal of free and open trade and investment in several ways. We will: z encourage and concert the evolving efforts of voluntary liberalization in the region z take collective actions to advance our liberalization and facilitation objective and z stimulate and contribute to further momentum for global liberalization.

4

We emphasize our resolute opposition to an inward-looking trading bloc that would divert from the pursuit of global free trade, and we commit ourselves to firmly maintain open regional cooperation. We reaffirm our determination to see APEC take the lead in strengthening the open multilateral trading system. We trust that enlarged participation by APEC economies in the WTO would facilitate greater regional cooperation. We will explore joint initiatives under the WTO, including preparations for the Ministerial Meeting in Singapore.

Ensuring that APEC remains consistent with the WTO agreement, we will achieve trade and investment liberalization steadily and progressively.

Desiring that trade and economic tensions among APEC economies be resolved in a nonconfrontational manner,

we are committed to finding ways of ameliorating trade friction. We agree on the desirability of an APEC dispute mediation service, without prejudice to rights and obligations under the WTO agreement and other international agreements.

5

In the Action Agenda, we have agreed to a set of fundamental principles to guide the achievement of our liberalization and facilitation: comprehensiveness; WTO consistency; comparability; nondiscrimination; transparency; standstill; simultaneous start, continuous process, and differentiated timetables; flexibility; and cooperation. We direct our ministers and officials to immediately begin the preparation of concrete and substantive Action Plans to be submitted to the 1996 Ministerial Meeting in the Philippines for assessment. Overall implementation of the Action Plans will begin in January 1997 and will be reviewed annually.

The Osaka Action Agenda is the template for future APEC work toward our common goals. It represents the three pillars of trade and investment liberalization, their facilitation, and economic and technical cooperation.

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To assist in this process, we instruct our ministers and officials to engage in consultation in a collective effort of a confidence-building nature to facilitate exchanges of information, to ensure transparency, and to contribute toward attaining the comparability of respective Action Plans.

The Action Agenda may be revised and improved as necessary in response to changing circumstances. While we have chosen the unique approach of concerted liberalization grounded in voluntarism and collective initiatives by the member economies as the key means for implementing the Action Agenda, its success hinges upon our own continuing efforts, strong self-discipline, and close consultation.

6

Governed by the Osaka Action Agenda’s principles of mutual respect and equality, mutual benefit and assistance, constructive and genuine partnership, and consensus building, we will promote actionoriented economic and technical cooperation in a wide range of areas. With the Action Agenda, APEC has gained renewed momentum and broader perspective for economic and technical cooperation.

Economic and technical cooperation implemented thorough various means including Partners for Progress serves to promote trade and investment liberalization and facilitation, to narrow the disparities within the region, and to achieve growth and prosperity for the region as a whole. We will thus work through policy dialogue and joint activities to broaden and deepen intraregional cooperation in all areas of our interest.

Private Health Insurance...

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z Low-cost technologies that minimize occupational hazards and thereby qualifying more workers for health insurance need to be introduced.

Ultimately, economic progress would enable a larger segment of the population to enroll in health insurance. z Government work in public education, advocacy and information dissemination on the importance of health insurance must be intensified.

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At the ministerial level, valuable consultations have been held on macroeconomic, financial, exchange rate, and other policies regarding capital flows, capital market development, and infrastructure financing. We also commend the valuable contribution at the ministerial level in such fields as telecommunications and information industry, transportation, small and medium enterprises, and science and technology. We hope that they will continue their good efforts.

7

We are pleased to announce that each of us has brought a package of initial actions demonstrating our firm commitment to achieving liberalization and facilitation.

These voluntary actions will spur and inspire APEC liberalization. They also represent the first wide-ranging initiatives to accelerate the implementation of our Uruguay Round commitments and to deepen and broaden the outcome of the Uruguay Round through, for example, acceleration of tariff reductions, early implementation of WTO agreement, and pursuance of deregulation.

Together with these measures, our collective actions including harmonizing and enhancing the efficiency of customs procedures and promoting mutual recognition and improving conformity assessment capabilities will yield immediate and tangible benefits for business. We urge non-APEC economies to follow suit and help global trade and investment liberalization.

z A suitable regulatory scheme to protect the public from undesirable practices of profit-oriented companies and thereby promote the image of the health insurance industry must be promoted. A combination of government regulation and self-regulation by a professional health insurance-related institution seems appropriate. z Government must provide or facilitate access to technical assistance in training managerial and support staff for better health insurance management. Results from a few community-

November-December 1995

8

The Eminent Persons Group and the Pacific Business Forum have made important contributions to the formulation of the Osaka Action Agenda. Highly appreciative of the dedication and wisdom of the people who took part in the process, we congratulate them on the successful completion of their task.

Recognizing that business is the source of vitality for the Asia-Pacific and the driving force for regional economic development, we will appoint the members of the APEC Business Advisory Council to provide insights and counsel for our APEC activities.

9

Our ambitious attempt to promote wide-ranging regional cooperation and foster the spirit of community in the Asia-Pacific will doubtless encounter numerous new challenges and incur new responsibilities despite, or perhaps because of, our economic growth. The Asia-Pacific region’s fast-expanding population and rapid economic growth are forecast to sharply increase the demand for food and energy and the pressure on the environment.

We are agreed on the need to put these interrelated, wide-ranging issues on our longterm agenda and consult further on ways to initiate joint actions so as to ensure that the region’s economic prosperity is sustainable.

Through our actions, we affirm the vital importance of expanding and strengthening the shared interests which are the foundation of APEC and of forging relationships of trust among our peoples.

We pledge to go forward together to meet the challenges ahead. DRN

based HMO experiments indicate that the HMOs needed technical assistance in drawing up implementation guidelines.

Marketing support is necessary to draw members while information and education are needed to promote an appreciation of the benefits offered and the managed care approach to doing it. All these will ensure a balance between the efforts for cost-containment and ensure an adequate and appropriate health care

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z Tax-financed public health budgets . In 1991, tax-financed health budgets financed 48 percent of total public health spending.

With the devolution of health services, local health budgets have become an important source of financing. Public health facilities provide services at almost no cost to the user and are nominally accessible to all Filipinos. z Payroll tax-financed Medicare program . Ten percent of total health expenditures are financed through the earmarked payroll taxes collected under Medicare. z Voluntary premium contributions to private insurance funds .

Private insurance—private commercial indemnity insurance, health maintenance organizations (HMOs), employer-based health schemes, and community or local health financing cooperatives—now supports up to 4 percent of total national health care spending.

B

etween 1980 and 1990, the Philippine population grew at an average annual rate of 2.3 percent.

This means that, on average, 1.2 million people are added to the population each year. Assuming a 24 percent utilization rate, an additional 288,000 health care users will have to be served by the health sector yearly. If we were to maintain just the same level of health spending at P2,000 per person, the health sector will have to raise about P576 million per year.

The rate of population growth notably varied by region. Between 1980 and 1990, for instance, the average annual growth rates of the population in the 15 regions of the country ranged from a high of 3.1 percent (Region 12) to a low of 1 percent (Region 8). The variation was even larger among provinces, ranging from 5.6 percent for Rizal to about 0.01 percent for Northern Samar. The high growth areas

12

include Metro Manila and its surrounding provinces while the provinces in Mindanao were the ones with low population densities.

Population distribution .

Nominally, there is rapid urbanization in the country but this observation needs to be carefully examined by considering natural increases, rural-urban migration, and the reclassification of barangays from rural to urban. On the whole, the urban population increased by 5 percent from 1980 to 1990. It is estimated that only about 45 percent of this increase is due to natural increase and migration. The reclassification of barangays from rural to urban accounts for 55 percent of the observed increase in urban population. This implies that the rapid increase in urban population does not necessarily indicate that urban-based health facilities will rapidly become congested. The greater number of so-called urban residents still remain in virtually rural settings without any access to health facilities.

Perhaps a more meaningful measure of the way the population is distributed throughout the country is population density. If the population in 1990 were evenly distributed throughout the Philippines, there would be about 200 persons per square kilometer. This ratio is not particularly high by world standards. However, the population is disproportionately concentrated in centers of economic activity.

In Metro Manila, the population density is about 12,400 persons per square kilometer while the Cordilleras only has 62 persons per square kilometer.

An important concern for health is that within high density metropolitan areas (including Cebu, Davao, and Cagayan de Oro), there exist pockets of high population density. One example is the case of Cebu City where the three most populated barangays in the inner city have a population density of up to 50,000 persons per square kilometer.

Population age-sex composition .

About 15 percent of the Filipinos belong to the 0-5 age group and about 5 percent

November-December 1995

are of ages 60 and above. This means that about 20 percent of the population belong to the group of heavy health care users. This highly dependent age group is supported by a working age population (15-65 years old) which comprises 55 percent of the population.

About half the working age population are between 15 and 30 years old.

This population age structure, which can still be appropriately represented as a pyramid, has only slightly changed between 1980 and 1990. In this intercensal period, the base of the population pyramid has slightly narrowed while the middle portion, especially ages 15-30, has slightly expanded. The shape of this age pyramid is primarily the result of past fertility. One measure which might explain the shrinking base is the childwoman ratio (CWR) which is defined as the number of children under 5 years old per woman belonging to the 15-49 age group. Over the years, the CWR has declined from 0.69 in 1979 to 0.66 in 1980 and finally to 0.56 in 1990.

There are about the same number of females as males. However, there are slightly more females than males in the 60 and above age group.

IMPLICATIONS FOR HEALTH CARE FINANCING REFORM Shifts in population structure

R

elatively high population growth rates imply that the rate of increase of the number of health care consumers will be proportionately high.

Financing resources will then have to increase at a much faster rate if they were to provide for existing unmet needs as well as to accommodate natural increases in demand for health services.

Meanwhile, the population concentration in urban areas does not necessarily imply that relatively more urban-based facilities need to be constructed. A large portion of the increase in urban population is simply nominal. As such, primary rural health facilities may still be the more effective

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intervention in serving reclassified rural residents.

In metropolitan areas, special consideration with respect to health care delivery needs to be made to address the special problems of those living in high density areas.

Furthermore, there are indicators that the age composition might significantly vary within an urban center. Adult health issues might be dominant in high density inner city areas where parents and working-age family members locate. On the other hand, health issues concerning children and the elderly might be dominant in suburban areas.

The population age groups requiring intensive medical attention (ages 0-5 and ages 60 and over) still remain small compared to the working age population. However, if gainful employment were not available for the labor force, the burden of financing the health needs of the dependent age groups may actually be heavier.

Implications of epidemiologic change

T

he mortality and morbidity patterns of the population are good measures of the kind of health services that are being demanded. An important issue for health care financing reform is the so-called health transition. Based on the experience of developed countries, health care needs shift away from communicable and infectious diseases toward chronic and rehabilitative care. This mainly derives from the changing population structure as well as the advances in disease control measures. This varying pattern of diseases implies that more expensive facility-based health care services will be demanded.

Changing mortality pattern . In general, mortality rates (based on medical service statistics) have continuously declined from 1965 to 1990. The decline is not the same for all age groups. Younger age groups have experienced a more rapid decline than

13

Table 1 Disease Mortality Trends Increasing secular trend Vascular diseases Malignant neoplasms Heart disease Typhoid fever Dengue fever Hepatitis Measles No definite secular trend Leprosy Malaria Nephrologic diseases Pneumonia Decreasing secular trend Gonococcal infection Syphilis Bronchitis Influenza Varicella Tetanus Diphtheria Whooping cough Poliomyelitis Avitaminosis Diarrhea Accidents Filariasis Schistosomiasis Source: Sarol (1994).

the older age groups. This may be due to gains in the prevention of deaths from communicable diseases including tuberculosis (all forms), bronchitis, avitaminoses, pneumonia, and diarrhea.

Government programs addressing acute respiratory infections, the expanded program on immunization (EPI), and the oral rehydration therapy may have significantly contributed to these gains.

However, in the same period, death rates from degenerative disorders such as cardiovascular diseases and malignant neoplasms have increased continuously.

These disorders are usually attributed to risky lifestyles and habits such as smoking and alcohol and dietary fat intake. It may be the case that this pattern emerged much earlier but was observed only when deaths due to infectious diseases significantly declined.

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There appears to be no difference in the mortality trends between males and females among the younger age groups. For older age groups, however, fatality rates have declined faster among females than males. This pattern is particularly evident for tuberculosis.

Unlike the health transition observed in developed countries (where chronic and degenerative diseases have replaced infectious and communicable diseases as leading causes of death), local pattern tends toward a situation where both types of diseases persist (Table 1). If this pattern continues, there will be serious implications on the amount of resources needed to finance the health sector. The level of expenditures on communicable disease control programs will have to be maintained, if not increased. At the same time, an increase in investments in facilities which can provide the more intensive services is needed to address chronic con-ditions.

Morbidity pattern. The four secular trends for morbidity rates among various diseases are shown in Table 2.

The most disturbing pattern is observed in typhoid fever, for which the morbidity rate increased throughout the study period. Other diseases including bronchitis, dengue fever and diarrhea also had increasing morbidity rates since the mid-1970s.

Influenza posted increasing rates between 1985 and 1990. On the other hand, diseases for which effective preventive measures are available had shown declining morbidity rates.

Diseases covered by the DOH’s EPI have been declining steadily since 1975.

Observed trends in disease morbidity vary across age groups.

Among younger groups, there was a much faster decline in morbidity rates.

This was particularly the case for immunizable diseases. However, other communicable diseases like influenza and typhoid fever had shown increasing morbidity rates for the

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particular, about 66 percent of urban poor respondents insisted that only EPage 13 sick persons should consult doctors.

This attitude is alarming because it severely impairs the effectivity of public health information campaigns Table 2 which are largely based in medical Disease Morbidity Trend facilities.

In addition, houseDiseases showing the trend Disease morbidity trend across three periods holds (especially 1965-1975 1975-1985 1985-1990 in rural areas) may hold on to Varicella, schistosomiasis, dengue fever, bronchitis, filariasis, diarrhea no trend increase increase values and beliefs which hinder Diphtheria, poliomyelitis, whooping cough, access to approtetanus, gonococcal infection, priate medical TB (all forms), malignant neoplasms no trend decrease decrease attention.

Hepatitis, syphilis, malignant neoplasms, Not only pneumonia, measles, malaria increase increase decrease are households unaware of the Influenza decrease decrease increase relative benefits Typhoid fever increase increase increase between home remedies and Adopted from Sarol (1994). facility-based care. They may also be unaware younger age groups. Older groups, on of their own abilities to finance medical the other hand have been increasingly care expenditures.

Respondent afflicted by chronic and degenerative households with members working in d i s e a s e s . Disease morbidity rates tend the wage and salary sector were to be similar for males and females but generally unaware of their entitlement marked differences were observed under Medicare. between the sexes for gonococcal Lack of knowledge required to infections and syphilis. There was a make home-based health care services decrease in cases among females. more efficient and effective.

About 38 percent of urban poor respondents believe that when one is sick, antibiotics

The Challenge of Health...

HOUSEHOLDS AND THE HEALTH CARE SYSTEM

H

ouseholds assume a key role in the health system. They are the ultimate source and beneficiary of the total resources available in the system. However, there are a number of problems which impede their maximum and efficient use of the resources in the system, viz: Lack of information needed to make appropriate decisions on spending and health care demand patterns. Majority of the respondents interviewed perceived that medical practitioners should be consulted only when one is not feeling well. In

Health care facility

Change in travel time

Poorest Quartile

should be taken right away.

There have been several reported cases when antibiotics were taken even in instances when it is not appropriate to do so, as in the case of dealing with the common cold.

Lack of accessible and affordable transport facilities that would allow better access to health care facilities. From a survey of the three major rural poverty groups in Misamis Oriental and Southern Bukidnon, it is observed that on average, small farmers reported more ailments per household relative to the landless workers and fishers. Nonetheless, it is the landless families who reported having made more consultations in the month prior to the interview. This pattern might be explained by the fact that families of landless workers usually had access to clinics located in the sugar or rubber plantations where they worked. On the other hand, small upland farmers were usually situated in isolated areas where travel is difficult.

Similar observations are made for demand for outpatient care. The rate of consultation is found to be highly responsive to travel time, all other

Table 3 Effects of an Increase in Travel Time on the Likelihood of Choosing a Health Care Facility, by Income Group Second

Third

Fourth

Richest Quartile

(I n p e r c e n t) Private clinic

from 0 to 1 hour from 1 to 2 hours from 2 to 3 hours

-23 -105 -119

-21 -73 -109

-18 -64 -97

-21 -25 -112

-20 -70 -115

Public clinic

from 0 to 1 hour from 1 to 2 hours from 2 to 3 hours

-38 -24 -16

-31 -26 -17

-74 -49 -33

-33 -34 -23

-6 -21 -11

Hospital

from 0 to 1 hour from 1 to 2 hours from 2 to 3 hours

-13 -47 -71

-18 -65 -97

-21 -75 -112

-21 -77 -116

-30 -106 -159

Source: Bautista (1993).

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factors held constant. Thus, many individuals in need of medical attention opt not to access services because of the time and transport cost involved in visiting an outpatient clinic. For example, by changing travel time from two to three hours, those who would have otherwise visited a clinic would opt not to (Table 3). This response is true for households from different income groups. In contrast, demand for hospital care services is much less sensitive to travel time and transportation cost.

What might happen is that household members requiring hospital care are likely to be admitted regardless of distance to the hospital. Even poorer families behave in the same way, but only after the illness has become severe and unbearable.

Incompatibility of work and social time schedules with service hours, especially of public health care providers. For most communities, public health clinics are accessible only in town or municipal centers. Such clinics are usually open during regular working hours on weekdays only.

Moreover, the presence of medical doctors tends to be irregular. The usual practice is to designate a particular day when a doctor would be present.

This creates scheduling problems especially for families with working parents. In urban poor communities, the preferred schedule would be after office hours.

For rural-based households, the most convenient day is the traditional market day. To save on travel time and transport cost, many rural households prefer that rural health centers be open on that same day. In the rural communities surveyed, the market day is usually Friday. It is during this day that residents from the remote barangays go to the town proper to sell their produce and buy what they need for the following week. Free dental services and immunizations, however, are provided in public clinics only on Wednesdays.

For many of these households, free dental services and

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vaccinations are not enough incentives for them to spend extra time and money Table 4 to travel to the town center.

How Hospital Costs are Financed by The burden of financing health Inpatient Care Users, by Region care services . The average houseAll NCR Region 2 Region 7 Region 10 hold monthly (I n P e r c e n t) income of Filipinos Family savings 59 55 74 60 65 is quite low Loans, sale of property 33 31 19 34 51 compared to the Gifts and transfers 16 21 7 6 18 cost of medical Employment benefits 4 4 2 1 9 care. The average Private insurance 2 2 0 4 0 Medicare 21 12 19 38 31 cost of outpatient Others 1 2 0 2 0 care including professional fees, diagnostics and Source of basic data: 1991 DOH-PIDS Household Survey. medicines is about 2 to 5 percent of average family income. The average expenditures are unanticipated, the cost of hospitalization is 33 times larger consumption pattern of households are than what the average Filipino earns in likely to be severely disrupted. Our a year. For poorer households, the concern here would be the effects on burden of paying for health services is food consumption, housing and other heavier not only because their incomes related expenditures which help build are low, but also because the flow of the health stock of other (especially income is very irregular. younger) household members. In effect, Capacity to finance health care paying for the medical needs of a sick services . The burden of paying for family member can jeopardize the health care services is dealt with by the future health and well-being of other household in a number of ways. First, household members. it can endure illness and not seek Investment in human capital is medical attention. Or, the household disrupted . Majority of households with can choose to buy less expensive but hospitalized members used their family perhaps low quality services. savings to finance the cost of hospital Otherwise, the household is forced to services (Table 4).

Among these cope with the cost of care by reducing households, it was reported that the current consumption and investment “savings” used were actually (sacrificing children’s schooling), by earmarked for children’s college foregoing future income (by borrowing education, investment in productive or selling productive assets), or by assets, or the family business. By tapping social networks, if available. sacrificing savings, the household, in As shown in Table 4, households effect, lessens the opportunities for their rely mainly on their own resources to children to have a better future. finance medical services. UnfortuCapacity to generate future nately, this approach to financing health income is reduced . Next to family care expenditures will likely have savings, another major source of adverse effects on the future well-being financing hospital services was loans of households. and sale of property. Personal assets Current consumption is dis- sold included animals (with a mean placed by large expenditures on value of P2,858), household appliances health . It was previously suggested (mean value of P1,520), land (mean that average hospitalization cost is value of P40,306), and jewelry (mean more than 400 percent of monthly family income.

Since large health

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value of P1,733).

Among rural households surveyed, the typical items sold included farm animals, farm implements, agricultural produce, and even land itself. Because of the urgency of the situation, families are likely to dispose of their assets well below their market value.

Social institutions as health insurance

B

eyond one’s capacity to self-finance, a household can rely on social institutions which pool a community’s resources and spread the burden of health care expenditures. In a way, institutions like family networks, community organizations, religious associations, and charitable organizations perform insurance-like functions. Only a small portion of a group of individuals linked by familial, ethnic, religious or even work relations will require medical attention in a given time period. And given the nature of illness and disease, it is unlikely that the group can identify with certainty which members will eventually require health services. The social institutions which provide insurance services to individual households include: extended family networks (i.e . , remittances, gifts, and transfers); informal community social networks (i.e . , paluwagan); organized community schemes (i.e . , health cooperatives); social networks (i.e . , church, charitable institutions); and employment-based networks (i.e . , labor unions, employers).

Implications on health care utilization patterns

G

enerally, respondents expressed more confidence on health professionals rather than traditional healers. Of all individuals who had complaints regarding their

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of the regression analysis undertaken by the project.

As noted, household composition represents a significant determinant of facility choice. Patients Response to Poorest Second Third Richest belonging to households health complaint Quartile Quartile with a greater number of children below 15 Consulted doctor 160 261 287 338 years are more likely to Consulted other health professional 28 15 8 8 seek care from a public Consulted traditional clinic whereas patients healer 30 14 19 12 from households with a Self-care 305 375 399 328 greater number of adults Total number over 14 years are less of r espondents 475 629 662 633 likely to seek care from a public clinic.

Source of basic data: 1991 DOH-PIDS Household Survey.

Patients with more years of schooling are health, only three percent consulted a more likely to seek care from a private traditional healer while 47 percent clinic. One possible explanation is that consulted a health professional. more educated individuals are more However, the type of provider chosen likely to be employed in the formal varied for households belonging to sector, and most employed individuals different income classes. In particular, have access to some kind of private among individuals who seek health insurance as part of their consultation, those with higher incomes compen-sation package. Usually, these tend to choose doctors over other health private health insurance plans cover consultations with professionals like nurses and midwives outpatient accredited private clinics. This line of (Table 5).

Effects of socioeconomic factors . reasoning could likewise explain why Families discriminate between public patients from households with a greater and private medical health providers. number of adults are less likely to seek Most respondents expressed care from a public clinic. More adults preference for private medical facilities in the household could mean more because these were perceived to be of working members who have access to better quality. However, the facility private insurance plans that include actually utilized by the poor turns out dependents in the coverage.

Effects of insurance coverage . Social to be different from what they insurance is a popular preferred. In particular, consultations health in private clinics were substantially component of health financing reform. less for poorer households (the number By introducing a national health program, the entire of consultations in public clinics insurance declined as incomes increased). Thus, population is organized into a single even if the poor really prefer to consult pool where resources and risks are in a private facility, their budget only shared. Furthermore, social health insurance programs aim to maximize allowed them access to public clinics. subsidization in terms of Choice of health care provider cross contributions among also varied among households. premium Specifically, educational level, age, households belonging to different gender, and household composition income classes. With a single national are found to significantly influence the pool of resources, it is hoped that the choice of consultation facility. financial barriers to health services by individual users are Observed differences are shown in faced reduced.

However, Table 6 which summarizes the results substantially

Table 5 Health-seeking Patterns,

by Income Group

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premium contributions and health benefits to be provided need to be carefully designed so that increases in health care utilization rates are not excessive.

What needs to be done Based on the above, there is a need to address the following concerns: z There is a need to provide households with better information so that home-based care can become more efficient and effective. This can assist in preventing the excessive use of facility-based health care services which can be caused by an expanded social health insurance program. z Physicians and medical facilities need not be present in all communities for access to health care to improve. In efforts to facilitate access to services, improvements in transport facilities should be taken more into consideration since it may be more effective than the dispersion of health care facilities in various locations. z The timing or schedule of service delivery in public health facilities (especially public clinics) need to be made more compatible with the schedule of economic and social activities of households so that accessibility is improved. z Strengthening social institutions, which serve to pool resources and share health risks, will help reduce unmet needs as well as other welfare losses associated with self-financing.

Furthermore, in introducing social

insurance programs, one has to carefully consider how these would complement existing social institutions with similar functions. Organizing a program which will only substitute for family and other social networks should be avoided. z Health insurance benefits must be carefully designed in order to avoid excessive use of expensive services.

The use of copayment, expenditure ceilings, utilization limits and the mix of services covered need to be explored to help curb observed adverse responses to insurance. z Extensive and intensive social marketing campaigns need to be undertaken if social insurance were to become attractive especially to poor and rural households. Observed low willingness to pay for insurance also means that collecting contributions is likely to be difficult or costly. z Socialized pricing of publicly provided services has the potential of allowing limited public budgets to be effectively targeted to special groups of beneficiaries. As richer households switch to the private sector when the price of public services are raised, poorer households can be better served by existing capacity and resources.

PROFILE OF HEALTH CARE PROVIDERS

A

n inventory of the existing stock of medical personnel reveals serious shortages for several health manpower categories. Supply projections also suggest that shortages are

Table 6 Effects of Noneconomic Factors on Choice of Medical Provider Variable Level of education (years of schooling) Illness severity (days sick) Age of patient Sex of patient (male as default) Number of children in the household (age less than 15) Number of adults in household

Private clinic

Public clinic

Hospital

positive no effect negative positive

no effect no effect no effect negative

no effect no effect positive no effect

negative positive

positive negative

negative no effect

November-December 1995

likely to increase in the coming years.

For manpower categories where there seem to be sufficient supply relative to standards and requirements, the problem is that they are unevenly distributed across regions and health facilities.

Profile and supply of physicians

C

ensus data show that majority of the current stock of physicians are young professionals, about 60 percent of whom are less than 40 years of age. The present population is almost equally distributed between the two sexes, unlike in the early 1900s, when the profession was largely dominated by men and the women constituted a mere 2.5 percent of the population.

The employment rate among doctors is estimated to be about 97 percent. Of those employed, 93 percent are working in urban areas, and mostly serving in hospitals. Among the doctors serving in the public sector, 72 percent work in hospitals. Despite pronouncements about the priority given to public health programs, only 28 percent are practicing as field service doctors based in rural health units. This pattern holds true for all regions but is more evident in Metro Manila.

A tally of physicians by type of specialization was generated using Medicare accreditation records. The tally shows that there are similar patterns of concentration in the same rich regions as with doctors in general.

Of the total number of specialists recorded, 73 percent are found in Regions 3, 4, and Metro Manila.

Production of physicians . Inputs to the production of medical professionals are determined by the number of freshmen enrollees in medical schools.

This figure is affected by the quota imposed by the Association of Philippine Medical Colleges and the National Medical Admission Test. Up to 4,500 students enter medical schools each year. Of these entrants, about 60

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The Challenge of Health...

EPage 17

percent are able to graduate and take their licensure examination. Aside from the annual increment, the total stock of medical professionals is also determined by decrements due to deaths, retirements, and permanent and temporary migration. About 4 percent of the average annual stock is estimated to leave the country as contract workers while less than 1 percent of the average annual stock permanently migrate to other countries. Based on these trends, the number of physicians posted in 1987 is estimated to increase by about 77 percent in the year 2000.

Estimating physician supply needs .

Health manpower needs, meanwhile, were estimated using two techniques.

One is the standard manpower to population ratios and the other is the Modified US Graduate Medical Education National Advisory Council (GMENAC) Requirements Model. The first technique identifies a suitable proportion of health manpower to a specific population size while the GMENAC model uses subjective normative standards based on the projected morbidity of the population at risk and some experts’ opinion on the proper utilization of services deployed against its morbidity.

The GMENAC model was used to project supply requirements for major specialties like surgery, cardiology, pulmonology, etc.

For other specialties like nuclear medicine, occupational/industrial medicine, manpower needs were estimated on the basis of either standard manpower to population ratio, laboratory needs or linkage to institutions employing them. Computation of the required number of nurses followed the framework of the GMENAC model but was based on the number of patients received in the hospital, clinic, or rural health unit.

A comparison of the net stock

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November-December 1995

with the standard requirements per work setting reveals a shortage of physicians in hospitals, schools, rural health units, and industrial establishments. The existing number of medical specialists in all fields except in internal medicine falls short of the Philippine Medical Association (PMA) recommendations. Based on GMENAC requirements, a similar observation can be made that the number of general practitioners and specialists is lacking.

However, no shortages are reported in fields such as p u l m o n o l o g y , pediatrics, surgery, and infectious diseases.

Profile and supply of dentists

U

licensees determines the inflow to the total stock of dentists, and the number of permanent emigrants and OCWs determines the outflows from the stock of dentists. Over 1,500 dentists are estimated to be permanently residing abroad while about 3 percent of the total stock (over 500 dentists) are assumed to be working as OCWs. Under the medium assumption, the number of dentists in 1987 is projected to increase by 92 percent in the year 2000.

Table 7 Profile, Stock and Flow of Selected Health Manpower (1990)

Physicians Dentists Nurses Midwives nlike medical doctors, nearly two-thirds of Profile and Stock Age: less 40 years (%) 59.73 68.9 87.9 82 dentists who are Marital: Married (%) 67.3 56.1 57 59.3 actively working are Gender: Female (%) 48.8 63.3 90.9 99 female.

The age Unemployment Rate (%) 3.4 4.6 5.2 6.7 structure and reHospital/clinic-based (%) 87.1 83.8 78.1 77 gional distribution of Rural-based (%) 7.5 8.7 16.8 34.1 dentists, however, Regional: Total NCR (%) 42.6 46.5 31.4 16.6 reveal a trend similar Regional: DOH personnel to that of doctors, i.e., NCR (%) 4.9 4.2 3.6 6.6 Flow of Health Manpower most dentists are Production: Range of yearly below the age of 40 attrition 48.5 33.2 67.1 41.6 and about threeSurvival Rate (Average) 65.3 46.2 66.2 54.7 fourths of the total Licensing Rate (Average) 124.1 91.7 69 74.4 International Outflows: supply can be found Permanent Emigrants 25.4 6.2 23.2 1.7 in Regions 3, 4, and OCWs 3.3 2.8 36.6 30.3 the NCR. Furthermore, as much as 91 Source: Development Academy of the Philippines, 1994. percent of them locate in urban areas.

In terms of work setting, about 74 percent of dentists Standard manpower to popupractice in private hospitals, clinics, lation ratios show a pattern in the and laboratories, 10 percent in public insufficiency of dentists in work health care facilities, 4 percent in public places similar to those where administration, and the rest in physicians are also lacking. undefined business areas.

Moreover, a comparison with the The number of freshmen enrollees GMENAC requirements reveals an in dental schools averaged about 4,000 acute shortage of dentists since their during the period 1983 to 1987. Of stock is consistently less than half of these enrollees, less than half (46 their requirements. percent) is expected to grad-uate. As with doctors, the number of new

DEVELOPMENT

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NEWS

Profile and supply of nurses

A

mong the categories of medical professionals considered in the research study, the nurses seem to be the youngest group, with almost 90 percent below 40 years old. As with dentists, female nurses outnumber the males.

The unemployment rate, however, is rather high compared to doctors and dentists. And of those who are employed, majority work in hospitals, clinics and laboratories, with about half hired by privately-owned facilities.

In terms of distribution, more than 80 percent of all nurses practice in urban areas. Like other medical professionals examined earlier, nurses are unevenly dispersed throughout the country, with one third found in the NCR and another 20 percent in Regions 3 and 4. Among the nurses working for the DOH, 67 percent are hospitalbased, while the remaining are working in community health centers or rural health units. The same pattern is observed in all other regions, except NCR, where the number of nurses in field services surpasses the number of nurses in hospital facilities.

Nursing schools have the highest number of freshmen students, with over 15,000 enrollees registering each year. Of those who enroll, about 70 percent are presumed to graduate but only 49 percent are expected to pass their licensure examination.

The supply of nurses in the local market is consistently declining due to international outflows, especially of those who are well-trained and highly specialized.

In 1987, the Philippine Overseas Employment Administration (POEA) recorded a deployment of close to 26,000 nurses, 87 percent of them to the Middle East. Moreover, in 1990, over 40,000 nurses migrated to other countries.

Because of this heavy outflow, the total number of nurses in the country is expected to decline from a level of over 75,000 in 1987 to only about 54,000 in the year 2000. The result is an artificial, yet acute, shortage

19

of over 40 percent of the nursing requirements of the local market.

Profile and supply of midwives

A

s in nursing, the midwifery profession is dominated by young (below 40 years old) and female midwives. They, however, have the highest unemployment rate (about 7 percent) among all medical professionals. Of those who are employed, 77 percent work in hospital facilities, with about 66 percent practicing in urban areas.

In terms of regional dispersion, only about 17 percent of midwives work in Metro Manila while another 30 percent work in Regions 3 and 4. This distribution pattern suggests that relative to other medical professionals, midwives are more evenly distributed across the country.

Next to nursing, midwifery schools have the highest number of freshman enrollees, with an average of about 12,000 entrants per year.

Of these enrollees, however, 45 percent are expected to drop out or shift to nursing. The average licensing rate for midwives is about 75 percent.

Despite increasing migration abroad, the supply of midwives is expected to be more than sufficient to cover overall requirements. However, the concern is a possible shortage of midwives available for employment in public rural health centers since midwives are increasingly drawn to jobs in health facilities in urban areas.

The overall picture

A

summary of the characteristics of the current stock of selected health professionals is presented in Table 7. Majority of the health professionals are young (aged below 40) and while the distribution between male and female physicians is even, females dominate the fields of nursing and midwifery. While employment rates of health professionals are generally higher than the rest of the population, midwives nonetheless have the highest unemployment rate among them.

November-December 1995

Moreover, about 80 percent of employed medical professionals serve in hospitals, clinics or laboratories, half of which are privately-owned establishments.

Most health professionals are highly concentrated in Metro Manila and the surrounding provinces.

A major threat to local supply is the international outflow of health professionals, particularly of doctors, nurses, and midwives. This affects not only the quantity of medical workers but also the quality of medical services since the good, trained, and experienced personnel are the ones usually lost to other countries, leaving the medical sector skills-deficient.

Supply shortages are seen in the groups of physicians, dentists and nurses while excess supply is observed in the group of midwives. In terms of work setting, health manpower shortage exists in public health, school health, and industrial health.

Moreover, the supply of nurses will not be sufficient to meet the standard personnel requirements in hospitals by the year 2000.

With reference to physicians, there is a shortage in the supply of both general practitioners and specialists.

The PMA-recommended ratios, though, show an abundance of doctors in the field of internal medicine while the GMENAC requirements suggest supply excesses in the fields of pulmonology, pediatrics, surgery, and infectious diseases. These imbalances are projected to worsen by the year 2000, with both supply excesses and deficiencies continuously increasing. DRN

Support Research Support Philippines 2000

DEVELOPMENT

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20

November-December 1995

Philippine Institute for Development Studies NEDA sa Makati Building 106 Amorsolo Street, Legaspi Village 1229 Makati City, Philippines

Private Health Insurance...

EPage 11 particularly among insurance firms with no medical staff. z There is a need to forge tie-ups between public tertiary hospitals and private insurance firms to provide some form of health maintenance plan in areas where there is a dearth of qualified hospitals. Under the setup, public hospitals could gain added revenues from employers' prepayment. z Lastly, government must promote income-generating projects along with community-health schemes to improve the financial viability of community health insurance. Public hospitals can also support communitybased health schemes in their respective areas by providing referral services

STAMP

that are affordable to the community insurance.

With the recent passage of the National Health Insurance (NHI) Law, the private health insurance industry will most likely be further strengthened.

Since NHI will initially offer the same package as the current Medicare, HMOs, commercial indemnity firms and employer-provided schemes can continue providing the benefits that they currently offer, i.e., coverage over and above current Medicare.

Furthermore, NHI will more likely tap the various existing community-based schemes to reach the informal sectors of the economy and expand coverage from there. Doing so could make community-based schemes more viable, since cross-subsidizations can be promoted among members of various schemes. DRN

Vol. XIII No. 6

November-December

1995

Editorial Board Dr. Ponciano S. Intal, Jr. President Dr. Mario B. Lamberte Vice-President Ms. Jennifer P.T. Liguton Director for Research Information Mr. Mario C. Feranil Director for Project Services and Development Ms. Andrea S. Agcaoili Director for Operations and Finance Atty. Roque A. Sorioso Legal Consultant

Staff Jennifer P.T. Liguton Editor-in-Chief Wilbert R. San Pedro Issue Editor

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